Allan Asher, director of campaigns, said modern electrical goods rarely go wrong and most elements were covered by other guarantees.

Speaking before a public hearing organised as part of the Competition Commission inquiry into extended warranties, Asher said: 'The message to consumers is simple - extended warranties are a complete waste of your money and by buying them you are lining the pockets of unscrupulous retailers that have little interest in customer care.'

John Clare, chief executive of Dixons, the UK's largest electrical retailer, told the inquiry that the issue of extended warranties was surrounded by myths. 'One of the outcomes of this inquiry, I hope, is that many of these will be buried once and for all,' he said.

Clare insited the profits from them were not unusual. 'Whilst you would not expect me to share margin information in an open forum such as this, the fact is that the retail margins which we earn on our Coverplan contracts are not unusual either in the context of our own industry or retailing in general.'

His comments are significant because Dixons has never stated what it earns from warranties. However, sector analysts reckon they account for between 30% and 50% of the group's UK profits.

Clare was critical of the UK supermarket sector. 'I would give my eye teeth to make some of the gross margins which colleagues in the supermarket sector achieve on some of their fresh food product lines - and they are increasingly competitors on low priced electricals.'

The CC launched its inquiry last July after a referral from the Office of Fair Trading. In an initial issues letter sent to retailers and insurers in March, the CC said there is evidence Dixons has a monopoly in the market for extended warranties on domestic electrical goods (DEGs).

'On evidence received so far, we consider that a scale monopoly situation may exist as Dixons appears to supply at least 25% of extended warranties on DEGs both by number and value,' it said.

Although the CC stressed it was not implying any adverse findings in relation to Dixons, the tone and language of the letter unsettled the group's investors.

The CC is due to report to Trade and Industry Secretary Patricia Hewitt by July 1.